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The Jones Act: A Burden America Can No Longer Bear

For nearly 100 years, a federal law known as the Jones Act has restricted water transportation of cargo between U.S. ports to ships that are U.S.-owned, U.S.-crewed, U.S.-registered, and U.S.-built. Justified on national security grounds as a means to bolster the U.S. maritime industry, the unsurprising result of this law has been to impose significant costs on the U.S. economy while providing few of the promised benefits.

This paper provides an overview of the Jones Act by examining its history and the various burdens it imposes on consumers and businesses alike. While the law’s most direct consequence is to raise transportation costs, which are passed down through supply chains and ultimately reflected in higher retail prices, it generates enormous collateral damage through excessive wear and tear on the country’s infrastructure, time wasted in traffic congestion, and the accumulated health and environmental toll caused by unnecessary carbon emissions and hazardous material spills from trucks and trains. Meanwhile, closer scrutiny finds the law’s national security justification to be unmoored from modern military and technological realities.

This paper examines how such an archaic, burdensome law has been able to withstand scrutiny and persist for almost a century. It turns out that, as in so many other cases of rent seeking, there is an asymmetry of motivations among those who benefit from the Jones Act’s protections and the vastly greater number who bear its costs. The protected domestic shipbuilding industry has a captive market from which it benefits handsomely and seeks to preserve by promoting fallacious arguments about the law’s necessity to national security, while the vast costs are dispersed across the economy in the form of higher prices, inefficiencies, and forgone opportunities that few people can even tie to the cause. That so many federal agencies and congressional committees have at least partial jurisdiction over different facets of the Jones Act also helps to explain its longevity. Lastly, this paper presents a series of options for reforming this archaic law and reducing its costly burdens.

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Introduction

The Merchant Marine Act of 1920 has been a fixture of U.S. law
and an imposition on the U.S. economy for almost 100 years. Better
known as the “Jones Act,” the law was presented as a plan to ensure
adequate domestic shipbuilding capacity and a ready supply of
merchant mariners to be available in times of war or other national
emergencies.1 The law aims to achieve those objectives
by restricting domestic shipping services to vessels that are
U.S.-built, U.S.-owned, U.S.-flagged, and U.S.-staffed. A century
of evidence supports the conclusion that the Jones Act has failed
in its main objectives while imposing substantial economic
costs.

As a result of these restrictions, the U.S. economy endures
artificially inflated shipping costs because the transport of cargo
between U.S. ports and within the country’s vast inland waterways
is off-limits to foreign competition and domestic shipping firms
must pay vastly higher prices for the ships they use. Although
higher shipping rates are the most obvious cost of the Jones Act,
they are merely the first in a cascade of adverse consequences
unleashed by the law’s restrictions.

Higher prices for waterborne transportation drive down demand
for shipping services. When businesses move less cargo by water,
shipping companies purchase fewer vessels. Reduced demand means
that producers build fewer ships and, accordingly, there are fewer
employment opportunities for merchant mariners. Meanwhile,
artificially inflated waterborne shipping rates increase demand for
alternative forms of transportation, including trucking, rail, and
pipeline services, raising those modes’ rates and inflating
business costs throughout the supply chain. Transportation expenses
— incurred to move raw materials and intermediate goods to
the next stage in the production process and final product to
retailers and end users — comprise a significant portion of
the cost of goods sold. Elevated transportation costs affect nearly
every business in nearly every industry, rippling through supply
chains, squeezing profits, curtailing business investment,
disadvantaging U.S. companies relative to their foreign
competitors, and depriving U.S. households of savings to spend
elsewhere in the economy or to invest.

Meanwhile, heightened reliance on trucks and freight trains not
only increases infrastructure and maintenance costs from wear and
tear on roads, bridges, and rail, but also generates greater
environmental costs. Surface transportation produces more carbon
emissions than ships do, and its more intensive use increases the
likelihood of highway accidents and train derailments involving
hazardous materials. Relatedly, time wasted in growing traffic
congestion — especially on highways running parallel to U.S.
sea lanes — generates enormous opportunity costs from lost
wages and lost output. Significant opportunity costs also can be
observed in the loss of revenues experienced when, for example, a
hog farmer in North Carolina purchases corn feed from Canada
instead of from a farmer in Iowa because exorbitant delivery costs
make the latter’s price uncompetitive. But even though some foreign
suppliers benefit by happenstance in this manner, the Jones Act has
been a persistent irritant to some of our most important trade
partners, serving to prevent better access for U.S. exporters in
their markets.

Despite these considerable costs and the absence of any
measurable benefits, the Jones Act has persisted for nearly 100
years. Why? The answer is complex, but it boils down to the same
causes that explain the persistence of rent-seeking behavior more
generally. The small number of beneficiaries, which primarily
include domestic shipyards and some labor unions, are more
powerfully motivated to preserve the status quo than are the far
more numerous adversely affected interests in seeking its
repeal.

Supporters of the status quo claim that those costs are
justified by the benefits associated with the Jones Act, which
include — most importantly — preservation of a robust,
competitive domestic shipbuilding industry to undergird U.S.
national security. But such claims are farcical. Over the years,
U.S. shipbuilding capacity has atrophied, the active fleet has aged
— in some cases into obsolescence — and the number of
merchant mariners has dwindled.

Nevertheless, there is a “bootleggers and Baptists” element in
play that adds another layer of complexity to repeal efforts.
(“Bootleggers and Baptists” refers to an economic theory where two
groups with opposing interests both want the same regulatory
outcome.2) Jones Act supporters have been
successful at cloaking their scheme in national security arguments.
When all else fails, and it becomes obvious that the Jones Act’s
restrictions significantly burden the economy in a variety of
perverse ways, proponents lean on a national security rationale
that is entirely without merit. Jones Act opponents — even
those advocating limited reforms — are portrayed as blind to
such considerations, which is evidence enough for some policymakers
to tune out arguments based on logic and facts.

The Jones Act has wreaked havoc on the U.S. economy. After
nearly a century of enduring its burdens, it is time to repeal the
law. Of course, repeal will not be easy because after 100 years,
incumbent interests, regulators, and politicians get used to the
privileges of a system that benefits a concentrated few. In
addition to untangling these political alliances, repeal efforts
will have to contend with pushback from agencies and committees
with oversight authority that have institutional interest in
protecting their jurisdictional turf. No fewer than 16
congressional committees and 6 federal agencies have some form of
oversight authority.

Short of full repeal, meaningful incremental progress toward
eventual repeal of the act would include relaxation of the
U.S.-build requirement so that the economy could at least benefit
from the availability of a larger fleet of safer, more efficient,
higher-quality vessels. Additionally, permanent Jones Act waivers
for Alaska, Hawaii, Puerto Rico, and other noncontiguous U.S.
territories, where the economies are disproportionately dependent
upon waterborne transportation, would mark progress. Finally, if
those reforms continue to prove elusive, another meaningful
incremental reform would be to ensure that the process of obtaining
Jones Act waivers is made more liberal, transparent, and
predictable.

Protectionism Cloaked in National Security

The Jones Act was signed into law on June 5, 1920, less than two
years after the end of World War I. The wartime deployment of
hundreds of thousands of American troops to Europe, as well as vast
quantities of materiel and equipment, had placed enormous demands
on the country’s sealift capacity and required the support of
foreign-flagged vessels.3 That dependence on foreigners was seized
upon by some in Washington as evidence of a glaring weakness in
U.S. national security and a reason to beef up the country’s
shipping fleet and shipbuilding capacity.

As Sen. Wesley Jones (R-WA) argued at the time:

Our shipping could be done more cheaply by others, and
so we had none. When the war came this lack of shipping cost us
hundreds of millions of dollars in higher freight rates or business
losses and hundreds of millions of waste in the hasty building of
ships to meet the emergency that threatened the overthrow of
civilization, and today the papers are filled with stories of
waste, corruption and inefficiency that was the inevitable result
of the conditions and the situation that confronted us.4

Toward that end, Senator Jones, serving as chairman of the
Senate Commerce Committee, introduced a bill to encourage greater
commercial use of U.S. ships. Among the provisions in Jones’s
legislation were requirements that ships eligible to transport
goods from one U.S. port to another must be U.S.-flagged,
U.S.-built, U.S.-owned, and crewed by U.S. citizens. Today, those
provisions require that such ships be at least 75 percent
U.S.-owned, at least 75 percent U.S.-crewed, and assembled entirely
in the United States with all “major components of the hull and
superstructure” fabricated domestically.5

Although Jones presented the legislation as a national security
imperative, various remarks made by the senator at the time betray
protectionist, even nationalist, motives:

Before the war we had to depend on foreign ships for
our business. We had to go to our competitors to get our goods to
market. Do you help your competitors fight you? Foreign lines gave
the advantage to themselves. When you get an advantage do you give
it to your competitor, I ask you? That’s what we had to expect and
that’s what we got. That is what we must continue to expect if we
continue along these same ideas of the old policy.

I want ships to fly the American flag on the Pacific. There are
interests in this country that do not want it. Our Canadian friends
are looking after their interests. There is nobody nowadays to look
after American interests except we Americans ourselves. It is said
this bill will drive foreign shipping from our ports. Granted. I
want to do it.6

Meanwhile, Jones accused opponents of the legislation of being
more concerned about advancing the interests of foreigners:

Wherever possible alien interests are hiring the best
American legal talent, buying the highest American writing ability,
controlling the most powerful American papers, journals and
magazines and cajoling or coercing American officials to serve
their end… . The man or the paper who would discourage the
upbuilding of our merchant marine is fighting the battle of alien
interests… . Counsel must be taken of courage and not of fear.
Our competitors will deceive us, scare us, bluff us or destroy us
if they can.7

Passed in both chambers one day before Congress adjourned for a
six-month recess, the Jones Act “received little publicity,”
according to a New York Times article published later that
month.8 Even though Senator Jones called his law
“one of the most important laws ever passed by Congress,” he also
acknowledged that the “public did not know much about the
measure.”9 While he turned out to be badly mistaken
about the economics of the Merchant Marine Act, Jones was correct
in his suggestion that it would have far greater economic effects
than was anticipated. One such impact was soon felt in the
territory of Alaska, where two Canadian shipping companies were
driven from the market.10 Shipping companies based in Seattle
— Jones’s official place of residence — soon enjoyed a
monopoly for serving Alaska, with increased prices for goods
traveling to and from the territory being the predictable
result.11

Regardless of whether the senator was motivated more by
protecting a U.S. industry or bolstering national security, the
evidence is overwhelming that the Jones Act has failed on both
counts.

How the Jones Act Restricts Shipping

The Jones Act restricts nonqualifying vessels from operating in
inland waterways and from transporting cargo between two U.S. ports
— an activity known as “cabotage.” Most governments have some
form of cabotage restrictions. In fact, only Gambia, Dominica,
Guatemala, and Belize do not.12

The Organisation for Economic Co-operation and Development
(OECD) distinguishes between two general types of cabotage
restrictions: those that completely exclude, without exception,
foreign-flagged ships from all cabotage activities, and those that
partially exclude foreign-flagged ships by extending broad
exemptions through trade agreements or narrow exemptions for
limited forms of cabotage. The United States is among 11 countries
that fully exclude foreign vessels without exception.13 According
to the World Economic Forum, the Jones Act provides the world’s
most restrictive example of global cabotage laws.14

Interestingly (or some would say “inevitably” in the United
States, where foreign competition in cabotage services is
restricted), only 2 percent of U.S. freight travels by sea. In the
European Union, where cabotage among the member states is
permitted, the corresponding figure is 40 percent.15 In
Australia, where vessels need not be built domestically to
participate in cabotage services, coastal shipping accounts for 15
percent of domestic freight.16 Meanwhile, after relaxing its cabotage
restrictions in 1994, New Zealand experienced a decrease of
approximately 20-25 percent in coastal freight rates over the
subsequent six years.17

The OECD’s Services Trade Restrictiveness Index measures and
ranks various aspects of countries’ services trade
restrictions.18 The index assigns values between 0
(least restrictive) and 1 (most restrictive). Figure 1 shows the
Services Trade Restrictiveness Index score for restrictions on
foreign entry regarding maritime freight transport services for 29
OECD countries and 9 non-OECD countries in 2017. Figure 1 reveals
that the United States is the third-most restrictive among all 38
countries and the most restrictive among OECD countries with
respect to maritime freight services.

The aggregate measure accounts for more than just cabotage
restrictions and factors in restrictions on owning or registering
vessels under the national flag as well as restrictions on
port-related services and cargo-sharing agreements. Domestic
shipbuilding requirements are not factored into this measure, but
the American-built requirement is a particularly onerous aspect of
the Jones Act. Of 56 countries surveyed by the U.S. Maritime
Administration, only Brazil, Egypt, Indonesia, Peru, Spain, and the
United States have domestic-build requirements.19

Although geographic and other factors account for some of the
differences observed in shipping capacity and rates, protectionist
cabotage and inland waterway restrictions — as well as
domestic-build and ownership requirements — explain a great
deal of the divergences. Certainly, if U.S. commerce is to be
burdened in perpetuity with these restrictions, there must be a
strong public policy rationale for the Jones Act.

Whither the Fleet?

The U.S. shipping industry is the first casualty of the Jones
Act. Of course, the primary objective of the law was to ensure a
vibrant shipping industry as a pillar of U.S. national security. If
vibrancy and fleet size were synonymous, Americans might sleep well
knowing that the U.S. fleet consists of more than 40,000 vessels.
However, we might choose to sleep with one eye open after learning
that barges operating primarily on the Mississippi River alone
account for 55 percent of that number.

In fact, nearly 9 of every 10 commercial vessels produced in
U.S. shipyards since 2010 have been barges or tugboats.20 Among
oceangoing ships of at least 1,000 gross tons that transport cargo
and meet Jones Act requirements, their numbers have declined from
193 to 99 since 2000, and only 78 of those 99 can be deemed
militarily useful.21 Even in their expressions of support
for the Jones Act, government officials concede that the U.S.
shipping industry and its associated ecosystem have been depleted.
Appearing before Congress earlier this year, Maritime Administrator
and retired rear admiral Mark H. Buzby testified that “over the
last few decades, the U.S. maritime industry has suffered losses as
companies, ships, and jobs moved overseas.”22

One of the main causes of that decline is the onerous
domestic-build requirement of the Jones Act, which prohibits U.S.
shippers from operating vessels constructed abroad. American-built
coastal and feeder ships cost between $190 and $250 million,
whereas the cost to build a similar vessel in a foreign shipyard is
about $30 million.23 Accordingly, U.S. shippers buy fewer
ships, U.S. shipyards build fewer ships, and merchant mariners have
fewer employment opportunities to serve as crew on those
nonexistent ships.

Meanwhile, facing exorbitant replacement costs, ship owners are
compelled to squeeze as much life as possible out of their existing
vessels. That means the Jones Act fleet is not only shrinking, but
rapidly aging. The typical economically useful life of a ship is 20
years.24 Yet three of every four U.S. container
ships are more than 20 years old and 65 percent are more than 30
years old. Excluding tankers, the ships in the Jones Act fleet
currently average 30 years old, fully 11 years older than the
average age of a ship in the world merchant fleet of other
developed countries.25

These increasingly decrepit vessels are not only inefficient,
but dangerous. A report by a British maritime technology university
found that standards and design have improved the safety of ships
over the years, but older ships lack these features or are not well
maintained over long periods of time.26 As should
be expected, older vessels are more prone to accidents.27

Likewise, the U.S. shipyards that produced these aging and
increasingly unsafe vessels are in a similarly diminished state.
The U.S. Maritime Administration (MARAD) last published annual data
on U.S. shipyards in 2004 and noted that there were 89 shipyards,
including 4 public shipyards, 9 active yards, 15 shipyards with
build positions that have not produced a ship in two years, 27
repair yards, and 34 top-side repair yards.28 In 2015 the
Maritime Administration listed the number of active shipyards at
124 but also pointed out that, of those, only 22 are “mid-sized to
large shipyards capable of building naval ships and submarines,
oceangoing cargo ships, drilling rigs and high-value,
high-complexity mid-sized vessels.”29 This pales
in comparison to shipyards in Asia. Japan, for instance, currently
has more than 1,000 shipyards, and it is estimated that China has
more than 2,000.30 There are also only 7 active major
shipbuilding yards in the United States, as compared to roughly 60
major shipyards in Europe (major shipyards are defined as those
producing ships longer than 150 meters).31

Table 1: Ships built, top 10 countries by gross tonnage
(2014-2016)Source: United Nations Conference on Trade and
Development, Division on Technology and Logistics, based on data
supplied by Clarkson Research Services.

Table 1 presents the top 10 countries for the total number of
ships built in gross tons during 2014-2016. At under 1 million
gross tons, U.S. shipbuilders’ output was less than 1 percent of
China’s and Korea’s shipbuilders.32

Not only has U.S. shipbuilding atrophied into global obscurity,
but the builders that do operate have become extremely reliant on
defense purchases. Of the seven major U.S. shipyards, four produce
ships exclusively for the military (of the three major shipyards
that produce oceangoing ships for commercial use, meanwhile, one of
them — the Philly Shipyard in Pennsylvania — is said to
be on the verge of shutting down due to a lack of orders33).34 Nearly two-thirds (98 of 150) of
new large, deep-draft vessel orders in 2014 came from the military,
which accounted for 70 percent of the shipbuilding and
ship-repairing industries’ revenues in 2014 and 2015.35

Just as the Jones Act has contributed to the decline of U.S.
shipbuilding, it has also impeded the goal of creating a ready
reserve of merchant mariners. The Transportation Institute —
an organization that supports the Jones Act status quo —
asserts that the law “guarantees a professional and ready force of
merchant mariners who are vital to America’s ability to supply our
military forces” and provides “manpower that the military can call
upon during deployments.”36 But those claims are dubious. In recent
congressional testimony, a senior union official conceded that “the
pool of licensed and unlicensed mariners has shrunk to a critical
level” and, absent government action, “the military will no longer
be able to rely on the all-volunteer U.S. Merchant Marine as our
nation’s fourth arm of defense.”37 Already, Gen. Darren W. McDew, the
head of the U.S. military’s Transportation Command, notes that a
protracted need for mariners would “stress the labor pool beyond
acceptable risk.”38

The Jones Act’s inability to fulfill its purpose only looks set
to worsen, given its growing divergence with the realities of
modern global commerce. Since its passage, the shipbuilding
industry and the ships themselves have undergone vast
transformations. When the Jones Act became law, the great shipyards
of the world were found in Europe, supply chains were rudimentary,
and the loading and unloading of ships was a labor-intensive affair
requiring days to complete. Today the vast majority of shipping
tonnage is built in Asia, complex global supply chains are
prevalent, and global transportation has been revolutionized by the
advent of the shipping container. Even the ships themselves have
been transformed. Today a 1,300-foot ship with a cargo capacity of
more than 18,000 TEU (twenty-foot equivalent units, roughly
equivalent to a shipping container) sails with a crew of 22 and can
manage with a mere 13.39 As recently as the mid-1970s, more than
30 people were required to operate a container ship of a
significantly smaller size.40

Rather than swim against this tide, other countries have
adapted. Although the shipyards of Europe no longer churn out large
cargo ships as they once did, competition has instead forced them
to find unique areas within the industry in which to specialize. As
a study produced for the European Commission notes:

Europe is active in many segments, and —
notwithstanding the overall dominance of Korea, Japan and
increasingly China — European companies are still dominant in
a few specialized market segments such as cruise vessels (99%
market share), offshore vessels (43%) and luxury yachts (65%)…
. In general, these segments are characterized by a high degree of
specialization and high-tech qualities, complex production
processes, in combination with limited numbers of vessels of the
same type that are to be built. As such Europe’s position can be
characterized as one of a specialized niche player.41

Absent competitive forces, the U.S. shipbuilding industry has
not felt compelled to evolve and similarly find its own competitive
niche. Instead, it produces numerous types of vessels for which it
possesses no particular advantages compared to foreign sources, and
at a much higher cost.

Rather than specializing in the production of one, two, or
several types of ships and purchasing other vessels from foreigner
builders more adept at their production — as U.S. firms
sensibly do in other segments of the transportation sector and the
economy more broadly — U.S. shipbuilders complacently settle
for mediocrity across a range of commercial ship classes. This
mediocrity is further confirmed by the absence of foreign demand
for U.S. ships. Exports from the sector, including repair services,
accounted for a mere 4.6 percent of the industry’s revenue in
2014.42

Yet we are expected to believe that this flailing industry is
doing its job to bolster U.S. national security?

Is the Nation More Secure?

Despite its portrayal by supporters as essential to U.S.
national security, the Jones Act is irrelevant to that objective.
The quality and characteristics of the Jones Act fleet are
increasingly out of sync with the demands of the military.
Moreover, the nature of modern warfare calls the Jones Act’s
utility into question.

Given the dilapidated condition of the Jones Act fleet, it
should come as no surprise that it plays a minor role in supporting
overseas military operations. Although meant to foster a vigorous
domestic maritime industry and avoid the need to rely on foreign
shipping during times of war, the Jones Act has done the exact
opposite. When U.S. forces were deployed to Saudi Arabia during
Operations Desert Shield and Desert Storm, a much larger share of
their equipment and supplies was carried by foreign-flagged vessels
(26.6 percent) than U.S.-flagged commercial vessels (12.7
percent).43 Only one U.S.-flagged ship was Jones
Act compliant.44 In fact, the shipping situation was so
desperate that on two occasions the United States requested
transport ships from the Soviet Union and was rejected both
times.45 So scarce were merchant mariners that
the effort required the services of two octogenarians and one
92-year-old sailor.46

At the time, Vice Admiral Paul Butcher, who was then deputy
commander of the U.S. Transportation Command, remarked that without
the availability of foreign-flag sealift, “It would have taken us
three more months to complete the sealift ourselves.”47

The Jones Act fleet has slipped further into irrelevance since
the Gulf War. When the U.S. military deployed to the Persian Gulf
region again in 2002-2003, U.S. commercial ships supplied just 6.3
percent of deployment cargo, while foreign-flagged ships moved 16
percent.48 This decline in the share of cargo
carried by foreign ships during Desert Shield/Desert Storm in large
part reflects the fact that the 2003 operation required
substantially less cargo than the 1991 conflict. Foreign ships are
only prioritized after domestic options have already been explored.
Had more cargo (materials/supplies) been needed, most of it would
likely have been delivered on foreign ships. Groups favoring the
Jones Act tout the fact that a Jones Act vessel, the Northern
Lights, participated in support of military operations in 2003
— but the fleet’s contributions do not appear to have gone
beyond this lone ship.49

Since the 2003 Iraq War the Jones Act fleet has declined from
151 ships to 99.50 Recent comments from the Pentagon
suggest that this is a concern. Noting the fleet’s dwindling size,
General McDew told Congress that this situation “demands that we
reassess our approach to ensure that the [United States] retains
critical national security surge sealift capabilities. We may also
need to rethink policies of the past in order to face an
increasingly competitive future.”51

In contrast to domestically built Jones Act vessels,
foreign-built ships have proven essential to the U.S. military’s
sealift capabilities. Of the 46 ships comprising the Maritime
Administration’s Ready Reserve Force — a fleet that helps
transport combat equipment and supplies “during the critical surge
period before commercial ships can be marshaled” — 30 are
foreign-built.52 Although worthy to serve in the
country’s defense, these same ships are ineligible to engage in
coastwise trade.

The irrelevance of the Jones Act to U.S. national security can
also be gleaned from the growing divergence between the
characteristics of its fleet and the needs of the armed forces. The
military, according to the Congressional Research Service, prefers
ships with speed and versatility that can “unload diverse cargos in
shallow harbors lacking shore-side cranes.”53 Jones Act
shippers, in contrast, prefer vessels that operate at slower, more
fuel-efficient speeds, are specialized for a particular type of
cargo, and are designed to operate in modern port facilities.
Meanwhile, increasing specialization within the commercial shipping
sector has reduced the likelihood that military requirements can be
met by Jones Act ships.54

Other aspects of today’s military further illustrate the growing
divide between the Jones Act and modern realities. At the time the
law was written, soldiers were transported to the theater of
operations in troopships, which slowly ploughed the waves. Today
such ships no longer exist. Instead, troops are flown to their
destinations aboard jet aircraft at hundreds of miles per
hour.55 And with modern conventional wars
typically measured in weeks or even days, there is often barely
enough time to lay down a keel before hostilities have ended.

Indeed, the goal of ensuring that domestic shipyards are capable
of churning out new vessels in times of war to replace losses or
add to the country’s firepower is also anachronistic. With the
exception of some smaller vessels sunk by mines in the Korean War,
the United States has not lost a ship to enemy action since World
War II. Thus, the value in exacting such a heavy, ongoing toll on
the country’s economy to promote a domestic shipbuilding capacity
that might be needed in the event of a long, early 20th-century
type of conventional war in the future is increasingly dubious.

Another component of national security is the capacity to
respond quickly and effectively to natural and manmade disasters.
In this area, the Jones Act again falls short. Rather than serving
as an asset in such scenarios, the law actually functions as an
impediment by disqualifying ships from providing relief.
Theoretically, this problem could be mitigated through presidential
waivers of the Jones Act, but — believe it or not —
protected industries tend to lobby in opposition to any waivers,
including those extended for humanitarian purposes. Keith
Hennessey, who served as director of President George W. Bush’s
National Economic Council, reported that following Hurricane
Katrina in 2005, shippers, shipbuilders, and maritime workers
lobbied the Bush administration hard and at all levels against a
waiver, demanding shorter time frames and narrower waiver
scopes.56

After Hurricane Maria hit Puerto Rico in 2017, President Trump
admitted to being hesitant to grant a Jones Act waiver because “a
lot of people who work in the shipping industry … don’t want
the Jones Act lifted.”57 Trump agreed to a mere 10-day waiver,
which was not enough time for a Norwegian ship to transport 53
containers of aid from New Orleans to Puerto Rico, or for a Dutch
vessel, owned by Greenpeace, to carry supplies to the beleaguered
island.58

Tallying the Costs

There are not many published estimates of the cost to the U.S.
economy of the Jones Act. In the 1990s, the U.S. International
Trade Commission (USITC) published several papers on the topic
using different assumptions, yielding estimates of economy-wide
costs ranging from $656 million to $9.8 billion.59 A 1998
Government Accountability Office assessment subsequently found the
trade commission’s approach to be reasonable, but noted that the
benefits of repeal may be smaller when factoring in the costs of
complying with U.S. tax, labor, and employee protection laws that
foreign competitors would have to incur in order to compete in the
U.S. shipping market.60

Since 2002 the USITC has declined to provide an estimate of the
law’s costs. The estimates it has provided, however, seem to
overlook the full range of costs generated by the Jones Act. The
costs attributable directly and indirectly to the law are
substantial, and the fact that they have not been comprehensively
tallied partly explains why it has endured for so long. The Jones
Act restricts shipping, which is an intermediate good (or service)
that factors into the cost of nearly everything purchased by
businesses and households. These costs are manifest in many
different ways.

In addition to the commercial and national security costs of
perpetuating a second-rate shipping industry as discussed above,
the Jones Act imposes a variety of significant costs on the U.S.
economy. We identify six broad cost categories that any proper and
comprehensive analysis of the Jones Act should take into account.
Those categories are: transportation costs, environmental costs,
lost wages and output, lost domestic revenue, lost foreign revenue,
and infrastructure costs.

In a forthcoming paper, we intend to provide detailed estimates
for the costs in each of these categories. For the purpose of this
paper, we discuss these costs generally and — mostly —
qualitatively, although some rough estimates are provided for
perspective where possible.

Transportation Costs. The most obvious
and direct effect of the Jones Act is on waterborne shipping rates.
By limiting participation in the U.S. maritime and inland waterways
transportation sector to U.S.-built, U.S.-owned, U.S.-flagged, and
U.S.-crewed ships, the costs of moving cargo by water are
artificially inflated. The resulting harms are a simple matter of
supply and demand.

Absent competition to discipline rates, and without much need to
keep operating costs in check, the Jones Act fleet is akin to
having a high-seas postal service — one that barely stays
afloat. To get a sense of the inefficiencies, a Maritime
Administration report found that the operating costs of
U.S.-flagged vessels engaged in foreign commerce in 2010 were 2.7
times greater than those of their foreign competitors.61 The daily
operating costs, which include crew, tools, supplies, maintenance
and repair, insurance, and overhead were tallied at $7,454 for
foreign-flagged vessels, but a whopping $20,053 for U.S.-flagged
vessels. Of the U.S. total, 68 percent ($13,655) was crew costs, as
compared to 35 percent for foreign-flagged ships. It should be no
surprise that labor unions are among the Jones Act’s most vigorous
supporters.62 Maintenance and repair costs,
meanwhile, are inflated by a provision in the Tariff Act of 1922
— supported by Senator Jones — mandating that repairs
made in foreign ports be subject to a 50 percent ad valorem
tax.63 Moreover, any rebuilding of a ship
abroad — defined as the addition of more than 7.5 percent of
the vessel’s steelweight to the hull and superstructure, or adding
a major component weighing more than 1.5 percent of the vessel’s
steelweight — will cause the vessel to lose its Jones Act
eligibility.

These high costs, in combination with the lack of foreign
competition, considerably inflate waterborne shipping rates, which
is nothing less than a massive tax on an economy otherwise blessed
with tens of thousands of miles of coastline and inland
waterways.64 But the cost of enduring higher
waterborne shipping rates is just one component of the
transportation cost premium resulting from the Jones Act. If U.S.
businesses have no choice but to use waterborne shipping — as
is more or less the case for Hawaii, Alaska, Puerto Rico, and Guam
— the transportation costs could be estimated as the
difference between U.S. rates and global market rates multiplied by
the average distance traveled and average weight (or average number
of containers shipped).

But in the continental United States, businesses have
alternatives to waterborne transportation. And the data show that
the amount of U.S. cargo shipped along the Atlantic coast, Pacific
coast, and Great Lakes today is about half the volume of the cargo
shipped that way in 1960, despite the economy’s considerable growth
in the intervening years.65 Over the same period, railroads have
increased their transport volume by about 50 percent and intercity
trucks have increased their freight by more than 200
percent.66 To confirm that waterborne shipping at
market rates didn’t lose its appeal, river barges and coastal ships
linking the United States with Canada and Mexico experienced growth
in their freight tonnage of more than 300 percent over the same
period.67

While the Jones Act reduced the supply of ships and drove up the
costs of waterborne shipping, it increased demand for road
transport, presumably driving up the prices of trucking and
rail.

Environmental Costs. By forcing more
carbon-intensive surface transportation methods into use, the Jones
Act is responsible for creating unnecessary environmental costs.
According to the World Shipping Council, maritime shipping “is the
world’s most carbon-efficient form of transporting goods —
far more efficient than road or air transport.”68 Maritime
shipping produces approximately 10-40 grams of carbon dioxide to
carry one ton of cargo one kilometer. In contrast, rail transport
produces 20-150 grams, and trucking — whose tonnage is
forecast to grow 44 percent by 2045 according to the Department of
Transportation — produces 60-150 grams.69 According
to transportation analysis firm INRIX, the monetary value of carbon
emissions caused by vehicles idling in traffic in 2013 was $300
million and by 2030 is expected to rise to $538 million — a
total of $7.6 billion over the 17-year period.70

In 2015, trucks — by far the most-used mode of moving
freight in the United States — carried 11.5 billion tons of
goods, compared to over one billion tons for Jones Act
vessels.71 If even a small percentage of this
cargo were shifted from trucks to coastwise shipping it could have
significant economic and environmental benefits. Indeed, according
to the World Economic Forum, if the “more than 500,000 qualifying
international containers moved over highway and rail” in 2012 “were
allowed to stay on water and trans-ship on international liner
services, the economic benefit … could exceed $200
million.”72 Although 38 states and the District of
Columbia are connected by navigable waterways and marine highways,
and nearly 40 percent of the U.S. population lives in coastal
counties, coastal shipping of cargo between U.S. ports in the Lower
48 states comprises a negligible 2 percent of domestic
freight.73 As if to make even more compelling the
environmental case for ending the Jones Act, according to the
Congressional Research Service, “some of the most congested truck
routes, such as Interstate 95 in the East and Interstate 5 in the
West, run parallel to coastal shipping routes, and water shipment
through the Saint Lawrence Seaway and the Great Lakes has the
potential to relieve pressure on major east-west highways,
pipelines, and railroads in the Midwest.”74

Provisions in the Jones Act also hinder the development of
alternative energy sources. For instance, offshore wind firm
Deepwater Wind became aware of the law when a specialized wind
turbine installation vessel it needed for installing a wind turbine
was prevented from touching the Rhode Island shore because it was
built in Europe (a leader in this type of ship construction) and
thus would have violated the Jones Act.75 This
nonsense was enforced despite there being no similar domestically
built vessel at the time. Accordingly, U.S. vessels less suited to
the task were employed to bring components from the coast to the
installation site, delaying the project and increasing its
costs.

To obtain more specialized vessels compliant with the Jones Act
to perform this task, meanwhile, will cost the offshore wind
industry dearly in terms of both time and money. An analysis
conducted for the Department of Energy found that a U.S.-built wind
turbine installation vessel would “likely cost 60% to 200% more
than a comparable vessel built in an Asian shipyard,” while another
report placed the price tag of such a ship at $222 million with a
construction time of 34 months.76

Lost Wages and Output. Traffic congestion
caused by the unnecessarily high volume of trucks on our highways
means not only wasted gas and diesel, but extra pollution and
wasted time. The economic damage is far from trivial. According to
the Maritime Administration, congestion in the nation’s
transportation system costs Americans $200 billion every year,
wastes 4.2 billion hours spent in traffic, and wastes 2.9 billion
gallons of fuel used while idling.77 In 2013, meanwhile, INRIX
estimated the costs of traffic congestion alone in lost wages and
output to the U.S. economy to be $124 billion, which it said would
rise to $186 billion by 2030 absent “significant action to
alleviate congestion.”78 On a per household basis, the annual
cost of traffic amounts to $1,700 today and is expected to rise
approximately 33 percent to $2,300 by 2030.79

If repeal of the Jones Act could reduce such costs by even a
small percentage the savings to the national economy would be in
the billions of dollars.

Lost Domestic Revenue. The profoundly adverse
effect of the Jones Act on U.S. shipping not only raises
transportation costs for businesses throughout the U.S. economy,
but it reduces revenues in many cases as well, squeezing profit
margins from both directions. How does this happen? Consider the
agricultural sector. Grain and soybean farmers in the Midwest, for
example, must make do with only two dry-bulk, ocean-going
Jones Act vessels to transport their commodities.80 According
to a 2013 Government Accountability Office report, farmers and
ranchers in Puerto Rico more often obtain animal feed and
fertilizers from foreign sources instead of domestically. Although
commodity prices are similar, rate differences between Jones Act
carriers and foreign carriers make foreign sourcing more attractive
— even when the foreign option is hundreds of miles farther
away.81 For similar reasons, Hawaiian cattlemen
have been forced to transship their cattle through Canada, or even
fly their cows by air.82 Relying on these costly alternative
means of transportation isn’t a long-term, revenue-winning
strategy.

Similarly, airlines operating in Puerto Rico typically import
jet fuel from foreign countries such as Venezuela rather than bring
it in from Gulf Coast refineries. This practice is attributable to
the difficulty of finding available Jones Act vessels to transport
fuel in the first place, and the exorbitant cost of doing so when
such vessels are found.83 For reference, within the continental
United States, moving crude oil from the Gulf Coast to the
Northeast on a Jones Act tanker costs $5 to $6 per barrel, but only
$2 per barrel when it is shipped from the Gulf Coast to Eastern
Canada on a foreign-flagged vessel.84 Amazingly,
a 1999 Government Accountability Office study found that the cost
to ship oil from Alaska’s North Slope to the U.S. Virgin Islands,
which are exempt from the Jones Act, was approximately three times
less than it cost to ship oil to the Gulf Coast, despite the voyage
around South America’s Cape Horn taking twice as long.85 Beyond
reduced competition due to the Jones Act, as well as its domestic
crew requirement, the fact that tanker ships manufactured in the
United States cost about four times more than their foreign-built
counterparts surely figures here.86

The Jones Act also explains the seemingly curious sourcing
decisions for other commodities, such as rock salt. Maryland and
Virginia, for example, obtain the product for wintertime use from
distant Chile instead of domestically, despite the United States
being the world’s largest producer of that commodity.87

Lost Foreign Revenue. For as long as the Jones
Act has been in force, foreign shipping companies and many of their
governments have been interested in obtaining waivers or seeing to
the law’s repeal or reform. In recent decades, as the
liberalization of trade barriers began spreading into the services
sectors, foreign governments have been specifically identifying the
Jones Act as an “offensive” target during trade negotiations. The
Europeans, for example, would like to participate in U.S. shipping
and other maritime services markets — and as this report
should be reinforcing, nearly all Americans should be supporting
their efforts. But the U.S. government has repeatedly refused to
even put the Jones Act on the table during such talks. In fact, the
text of every U.S. free trade agreement explicitly protects the
Jones Act. As a result, U.S. trade partners have correspondingly
reduced access to their markets than would otherwise have been the
case as punishment for Washington’s refusal to cede ground on the
Jones Act. There is a cost to bear for this intransigence, and it
comes by way of attenuated commercial opportunities in foreign
markets for U.S. businesses.

Although it is difficult to put an estimate on the opportunity
cost to U.S. exporters, it is no doubt in the billions of
dollars.

Infrastructure Costs. Among the externalities
generated when trucks and freight trains are used as substitutes
for waterborne shipping is wear and tear on our highways, bridges,
and rail lines. According to a Congressional Budget Office report,
2014 federal government spending on highways totaled $165 billion,
of which $92 billion went to capital spending and $73 billion to
operations and maintenance.88 Although trucks account for only 10
percent of the total miles traveled on U.S. roadways, they are
responsible for more than 75 percent of total road maintenance
costs.89 U.S. railways and roadways are being
pushed to their limit. The Society of Civil Engineers has estimated
that fixing the country’s surface transportation infrastructure
would require an investment of at least $155 billion per year,
which amounts to roughly 23 percent of the government’s $666
billion budget deficit in 2017.90

Jones Act restrictions affect other important maritime services
as well, including oil spill containment and cleanup, offshore wind
farm operations, and the dredging of ports and rivers. In addition
to complicating and making more expensive the provision of disaster
relief and alternative energy, as already described, these
restrictions drive up the costs to taxpayers of infrastructure
projects, including deepening harbors to accommodate larger
vessels, as well as routine maintenance of seaports and rivers.

The 10-year project to widen the Panama Canal for more traffic
and a new class of supersize container vessels was recently
completed. The added capacity of these “Post-Panamax” ships can
lower shipping costs 15-20 percent, but harbors need to be at least
47 feet deep to host them. In 2015, the U.S. Army Corps of
Engineers reported that only 7 of the 44 major U.S. Gulf Coast and
Atlantic ports could accommodate these ships, but domestic dredging
capacity is limited. The absence of suitable harbors means fewer,
but more expensive, infrastructure- and business-development
projects. It also means that Post-Panamax ships will have to
continue calling on West Coast ports, where their containers will
be put on trucks and railcars to transport products from Asia to
the U.S. East and Midwest — a slower and more expensive
process.91

Analysts at Samuels International Associates estimate that
European dredgers, if permitted access to the market, could save
U.S. taxpayers $1 billion a year on current projects.92

Considered in the aggregate, the economic and opportunity costs
of the Jones Act are far more significant than is commonly
perceived. Accounting for the actual inflated costs of
transportation and infrastructure, the forgone wages and output,
the lost domestic and foreign business revenue, and the monetized
environmental toll puts the annual cost of the Jones Act
in the tens of billions of dollars. And that figure doesn’t include
annual administration and oversight of the law.

One Hundred Years Too Many — Repealing the Jones Act

If the evidence supporting repeal of the Jones Act is so
compelling, why have we allowed the U.S. economy to be burdened
under its weight for nearly a century? The answer lies in the
politics and asymmetries in motivation between those advocating
reform and those seeking preservation of the status quo. The
beneficiaries of the status quo are limited in number but well
organized, and they consider the law a cash cow. They are willing
to devote significant resources to protecting and preserving their
scheme. Meanwhile, the hundreds of millions of the rest of us, upon
whom the burdens are foisted, don’t consider reparation or
mitigation of the situation a priority. The costs are significant
but are spread across the economy like a stealth tax.

These asymmetries have created a situation where the interests
committed to preserving the Jones Act have opted to neglect making
economic investments in their businesses, while focusing instead on
their political investments. Such political investments have paid
dividends. Consider Alaska and Hawaii, the two states most
adversely affected by high shipping rates. Alaska Sen. Lisa
Murkowski (R) and Rep. Don Young (R) are both on record supporting
the Jones Act, as are all four members of Hawaii’s congressional
delegation. It turns out that states and districts that are
especially dependent on maritime transportation also happen to be
home to maritime interests that benefit from the law. It should
come as no surprise that the interests of such politically
connected groups in Alaska and Hawaii take precedence over those of
their residents.

Among the obstacles to Jones Act reform is the complex web of
special interests that benefit from preservation of the status quo.
Among Jones Act supporters are U.S. shipbuilders, merchant
mariners, various maritime unions, and those who actually believe
the law is essential to national security. Meanwhile, there are no
fewer than 6 federal agencies and 16 congressional committees with
Jones Act enforcement and oversight authorities.

Customs and Border Protection (CBP) has primary responsibility
for enforcement and administration of the Jones Act. The agency
advises and makes recommendations concerning waiver requests to the
secretary of the Department of Homeland Security, who ultimately
decides whether to grant them. The Maritime Administration within
the Department of Transportation keeps records on the maritime
transport system, such as the operating status of U.S.-flagged
vessels, and has the authority to waive the U.S.-build requirement
of the Jones Act under certain circumstances. The U.S. Coast Guard
is responsible for determining vessel eligibility and issues
certificates and other documentation. The Department of Defense
informs CBP when it needs a waiver to be issued in the interest of
national defense, but that waiver process is actually automatic,
requiring no Department of Homeland Security approval. Finally, the
Department of Energy advises CBP on requests for waivers if there
are shortages or imminent shortages in the energy supply.

In addition to the day-to-day administration of the Jones Act,
there are a number of congressional committees with various
oversight authorities, including in the House the committees on
Transportation and Infrastructure; Natural Resources; Armed
Services; Homeland Security; Judiciary; Education and the
Workforce; Ways and Means; Appropriations; and in the Senate the
committees on Commerce, Science, and Transportation; Energy and
Natural Resources; Armed Services; Homeland Security and Government
Affairs; Judiciary; Finance; Appropriations; and Health, Education,
Labor, and Pensions. Any attempts to repeal the Jones Act will
require deft understanding of the interplay among the various
protected interests and this multitude of agencies and committees,
each of which may be inclined to throw sand in the gears of reform
if its jurisdiction is threatened.

Repealing the Jones Act will require a concerted effort among
organizations committed to exposing the costs and unseemly
political alliances that have metastasized over the decades. It
will require understanding and neutralizing the interlocking but
counterintuitive interests that have emerged in support of the
status quo. For example, are the trucking and rail industries
— which benefit from higher waterborne transportation rates
— financially or politically supporting the efforts of the
maritime unions and shipbuilders to thwart reform? It will require
a relentless effort to overcome political sclerosis and to convince
policymakers, the media, and the public of the Jones Act’s enormous
burdens — and the vast dividends to be reaped from
reform.

Short of complete repeal, we offer three important reforms that
would help lift the burden of the Jones Act on the U.S.
economy.

Grant limited cabotage rights to non-Jones Act compliant
vessels

The federal government could allow non-Jones Act ships to carry
goods from one U.S. port to another, provided that the vessel
originated in a foreign port and that it would continue on to
another foreign port after discharging its domestic U.S. cargo in
another U.S. port. For example, a ship sailing from Rotterdam could
transport cargo from New Jersey to Miami, provided it then sailed
to another foreign port — say, Kingston, Jamaica. This would
increase competition in domestic shipping, increasing efficiencies
and reducing the costs of shipping services.

Grant a permanent exemption of the Jones Act for Alaska,
Hawaii, Puerto Rico, and Guam

For Alaska, Hawaii, and the various U.S. territories, which are
located hundreds — and in some cases, thousands — of
miles from the U.S. mainland, the Jones Act presents a particularly
heavy burden.93 Forced to rely upon Jones Act vessels
for trade with the rest of the country, these states and
territories suffer from artificially inflated transportation costs
and an inability to take full advantage of international trade
routes. A non-Jones Act compliant ship steaming from Japan to Los
Angeles, for example, will not to be able to stop in Hawaii on the
way there (nor the reverse). Granting exemptions for these
far-flung states and territories would have the salutary effects of
both relieving them of an unnecessary burden as well as serving as
an experiment to assess the costs and benefits of Jones Act
liberalization with a view toward future liberalization for the
entire country.

Eliminate the U.S.-build requirement

The U.S.-build requirement is met when a vessel is assembled in
the United States and “all major components of its hull and
superstructure are fabricated in the United States.”94 This
requirement of the Jones Act is the most immediately burdensome to
industry, as it raises the costs of building ships within the
United States, thereby reducing our competitiveness. Furthermore,
this requirement is out of step not only with the realities of
commerce in a global-supply-chain world, but also with the
practices of U.S. shipbuilders. Increasingly, “U.S. companies that
assemble oceangoing vessels rely heavily on foreign parts, foreign
investment and foreign shipbuilding expertise,” often having
leading South Korean firms doing the ship design.95 Beyond
design, foreign components also make up the engines and other
electronic equipment as well, making it inaccurate to say that
these ships are “made in America” in the first place.96 Since U.S.
shipyards are using many foreign inputs anyways it is time to stop
punishing them from benefiting even more from advances in
technology that could help put the U.S. shipbuilding industry in
line with modern developments.

Ultimately, reform of the Jones Act depends on the willingness
of Congress to act on behalf of the American citizens who are
economically burdened by the law. For too long, Congress has turned
a blind eye as the costs have continued to mount. After almost 100
years of failure, the need for repeal is clear. And the time to act
is now.

Conclusion

By any measure, the Jones Act has been a failure. Under its
watch the U.S. shipbuilding industry has atrophied, its shipping
fleet has withered, and any contribution to the military’s sealift
capability has been trivial at best. The failure of the Jones Act
to meet its intended objectives, meanwhile, has inflicted
considerable economic harm through a variety of direct and indirect
channels. Rather than serving to bolster national security, the
Jones Act has stultified domestic shipbuilding, diminished the size
of America’s merchant marine reserve, and hamstrung our ability to
respond expeditiously and effectively to natural and manmade
disasters.

Among the world’s cabotage laws, the Jones Act stands out for
its extreme protectionism. Only a handful of countries require
ships participating in their domestic maritime services to be built
domestically and none have more onerous restrictions. Moreover,
there are no comparably stringent regulations of other means of
transportation in the United States. The wave of deregulation that
brought renewed efficiency and vitality to the rail, trucking, and
airline industries in the 1970s and 1980s left the maritime sector
untouched.

Accordingly, the U.S. shipbuilding industry is a shambles.
U.S.-built ships are as much as six to eight times more expensive
than foreign-built ships and, as a result, there are far fewer of
them. Indeed, over the past three decades U.S. production of cargo
and tanker vessels has typically been in the low single
digits.97 The high cost of shipbuilding has
contributed to an aging fleet, as there is less incentive to invest
in newer ships. Typically, a ship has a total life expectancy of
about 20 years, but — excluding tankers — the Jones Act
fleet averages 30 years of age. Rather than ensure the existence of
a strong domestic shipbuilding industry, the absence of competition
has discouraged shipbuilders from innovating, keeping up with
industry standards, or even building many new ships.

Meanwhile, the higher costs imposed on shippers are passed on to
their customers — the intermediate goods-consuming producers,
wholesalers, and retailers — who absorb some of the costs and
pass the rest on to consumers. Because these costs are dispersed
over a broad swath of interests, the per entity incidence is
generally not significant enough to make repeal of the law a
priority for them. Moreover, the disparate interests and concerns
of these downstream entities make it more difficult to appreciate
the commonality of purpose in repeal.

That such a burdensome law has evaded meaningful reform for
nearly 100 years speaks to the determination of a small,
well-organized, well-connected class of producers and unions that
have succeeded over the years in portraying any effort to reform or
repeal the Jones Act as an affront to national security. The time
has come to finally turn the tables and for Congress to repeal this
onerous law.

5 Per Coast Guard regulations,
major components are deemed to be those that exceed 1.5 percent of
the vessel’s steelweight. For an extensive discussion of the
ownership aspect, see Constantine G. Papavizas, “Public Company
Jones Act Citizenship,” Tulane Maritime Law Journal 39,
no. 2 (Summer 2015): 383-437,
https://www.winston.com/images/content/9/9/v2/99387/DC-775305-v1-Public-Company-Jones-Act-Citizenship-Published-Art.pdf.
The 75 percent ownership rule has been in place since the Jones
Act’s beginning and has its origin in the Shipping Act of 1916,
when foreign interests were buying up U.S. ships during WWI. The
origin of the crew requirement remains unclear.

54 For more discussion, see
Fritelli, “Cargo Preferences for U.S.-Flag Shipping.”

55 The New York Times
reported that in 2003 almost 500,000 troops were airlifted to Iraq
on civilian aircraft alone via the Pentagon’s Civil Reserve Air
Fleet program. See Micheline Maynard, “Pentagon Gives Airlines a
Lifeline with Payments for Moving Troops,” New York Times,
December 26, 2003.

64 In 2012 the Federal Reserve
Bank of New York released a report that found shipping a 20-foot
container of household and commercial goods from the East Coast of
the United States to Puerto Rico would cost an estimated $3,063. To
send the same shipment to nearby Santo Domingo, Dominican Republic,
or Kingston, Jamaica — destinations that are not subject to
Jones Act restrictions — would cost $1,504 and $1,687,
respectively. Federal Reserve Bank of New York, “Report on the
Competitiveness of Puerto Rico’s Economy,” June 29, 2012,
https://www.newyorkfed.org/medialibrary/media/regional/PuertoRico/report.pdf.

93 Guam is exempt from the Jones
Act’s domestic-build requirement but in practice is still subject
to this stricture as many of the ships that sail to the island from
the continental United States first stop in Hawaii and thus must be
fully compliant with the law. The U.S. Virgin Islands, meanwhile,
have a full Jones Act exemption.